{"id":13322,"date":"2020-09-24T18:24:08","date_gmt":"2020-09-24T12:54:08","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=13322"},"modified":"2020-11-24T17:22:53","modified_gmt":"2020-11-24T11:52:53","slug":"conversion-of-debentures-into-shares","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/","title":{"rendered":"Conversion of Debentures Into Shares: Its Complete Procedure"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The term Conversion of Debentures into Shares denotes a process under which a Debenture Holder decides to become a Shareholder of the company by converting his\/ her Debentures into Shares. Further, after becoming a Shareholder in the company, the said person will get the Right to Vote.<\/p>\n\n\n\n<p>In this blog, we will discuss the concept of Conversion of Debentures into Shares and the Procedure for the same.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a54af0339fad\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a54af0339fad\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Concept_of_Debentures\" title=\"Concept of Debentures\">Concept of Debentures<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Key_Features_of_Debentures\" title=\"Key Features of Debentures\">Key Features of Debentures<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Benefits_of_the_Issue_of_Debenture\" title=\"Benefits of the Issue of Debenture\">Benefits of the Issue of Debenture<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Different_Types_of_Debentures\" title=\"Different Types of Debentures\">Different Types of Debentures<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Based_on_Security\" title=\"Based on Security\">Based on Security<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Secured_Debentures\" title=\"Secured\nDebentures\">Secured\nDebentures<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Unsecured_Debentures\" title=\"Unsecured\nDebentures\">Unsecured\nDebentures<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Based_on_Time\" title=\"Based on Time\">Based on Time<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Redeemable_Debentures\" title=\"Redeemable\nDebentures\">Redeemable\nDebentures<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Irredeemable_Debentures\" title=\"Irredeemable\nDebentures \">Irredeemable\nDebentures <\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Based_on_Convertibility\" title=\"Based on Convertibility\">Based on Convertibility<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Convertibility_Debentures\" title=\"Convertibility\nDebentures\">Convertibility\nDebentures<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Non-convertibility_Debentures\" title=\"Non-convertibility\nDebentures \">Non-convertibility\nDebentures <\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Based_on_Coupon_Rate\" title=\"Based on Coupon Rate\">Based on Coupon Rate<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Specified_Coupon_Rate_Debentures\" title=\"Specified Coupon\nRate Debentures\">Specified Coupon\nRate Debentures<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Zero_Coupon_Rate_Debentures\" title=\"Zero Coupon Rate\nDebentures\">Zero Coupon Rate\nDebentures<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Based_on_Registration\" title=\"Based on Registration\">Based on Registration<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Registered_Debentures\" title=\"Registered\nDebentures\">Registered\nDebentures<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Bearer_Debentures\" title=\"Bearer\nDebentures\">Bearer\nDebentures<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Based_on_Priority\" title=\"Based on Priority\">Based on Priority<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#First_Debentures\" title=\"First Debentures\">First Debentures<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Second_Debentures\" title=\"Second\nDebentures\">Second\nDebentures<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Concept_of_Equity_Shares\" title=\"Concept of Equity Shares\">Concept of Equity Shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Benefits_of_the_Issue_of_Equity_Shares\" title=\"Benefits of the Issue of Equity Shares\">Benefits of the Issue of Equity Shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Different_Types_of_Share_Capital\" title=\"Different Types of Share Capital\">Different Types of Share Capital<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Authorised_Share_Capital\" title=\"Authorised Share Capital\">Authorised Share Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Issued_Share_Capital\" title=\"Issued Share Capital\">Issued Share Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Subscribed_Share_Capital\" title=\"Subscribed Share Capital\">Subscribed Share Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Paid_Up_Capital\" title=\"Paid Up Capital\">Paid Up Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Right_Shares\" title=\"Right Shares\">Right Shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-31\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Bonus_Shares\" title=\"Bonus Shares\">Bonus Shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-32\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Sweat_Equity_Shares\" title=\"Sweat Equity Shares\">Sweat Equity Shares<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-33\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Procedure_for_the_Conversion_of_Debentures_into_Shares\" title=\"Procedure for the Conversion of Debentures into Shares\">Procedure for the Conversion of Debentures into Shares<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-34\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Check_Articles_for_Association\" title=\"Check Articles for Association \">Check Articles for Association <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-35\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Send_Notice_for_Board_Meeting\" title=\"Send Notice for Board Meeting\">Send Notice for Board Meeting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-36\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Hold_a_Board_Meeting\" title=\"Hold a Board Meeting\">Hold a Board Meeting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-37\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Hold_a_General_Meeting\" title=\"Hold a General Meeting\">Hold a General Meeting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-38\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#File_Form_MGT_14\" title=\"File Form MGT 14\">File Form MGT 14<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-39\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Letter_of_Option\" title=\"Letter of Option\">Letter of Option<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-40\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Allotment_of_Equity_Shares\" title=\"Allotment of Equity Shares\">Allotment of Equity Shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-41\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Issuance_of_Share_Certificate\" title=\"Issuance of Share Certificate\">Issuance of Share Certificate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-42\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Changes_in_the_Register_of_Charges\" title=\"Changes in the Register of Charges\">Changes in the Register of Charges<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-43\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Entry_in_the_Register_of_Members\" title=\"Entry in the Register of Members\">Entry in the Register of Members<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-44\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Filing_of_the_Return_of_Allotment\" title=\"Filing of the Return of Allotment\">Filing of the Return of Allotment<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-45\" href=\"https:\/\/swaritadvisors.com\/learning\/conversion-of-debentures-into-shares\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Debentures\"><\/span>Concept of Debentures<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term \u201cDebenture\u201d denotes a Long Term Security having a Fixed Interest Rate, issued by a <strong><a href=\"https:\/\/swaritadvisors.com\/private-limited-company-registration\" class=\"text-primary\">Private Limited Company<\/a><\/strong> against the Assets. In other words, Debentures denotes a Certificate Loan issued by a company at a Fixed Rate of Interest. <\/p>\n\n\n\n<p>Further, Section 2(30) of the Companies Act 2013 defines the term \u201cDebenture\u201d as a Debenture Stock, bond, or any other instrument issued by the company for evidencing a debt. <\/p>\n\n\n\n<p>Moreover, Section 71 of the Companies Act 2013 and Rule 18 of the Companies (Share Capital and Debenture) Rules 2020 acts as the Regulatory Framework for the Issue of Debentures.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_Features_of_Debentures\"><\/span>Key Features of Debentures<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" loading=\"lazy\" width=\"1024\" height=\"768\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Key-Features-of-Debentures-1024x768.png\" alt=\"Key Features of Debentures\" class=\"wp-image-13324\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Key-Features-of-Debentures-1024x768.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Key-Features-of-Debentures-300x225.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Key-Features-of-Debentures-768x576.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Key-Features-of-Debentures.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure><\/div>\n\n\n\n<p>The <strong><em>key features<\/em><\/strong> <strong><em>of a Debenture<\/em><\/strong> are as\nfollows:<\/p>\n\n\n\n<ol><li>A Debenture does not have a Voting Right;<\/li><li>It acts as a Debt or Liability for a Company;<\/li><li>A Debenture can be both Secured or Unsecured;<\/li><li>It carries a Fixed Rate of Interest;<\/li><li>It can carry a Zero Rate of Interest as well;<\/li><li>A Debenture bears a Common Seal of the Company;<\/li><li>A Debenture Holder is not the Owner of the Company;<\/li><li>The Interest charged on Debentures is a Tax-Deductible Expense;<\/li><li>It promotes both Long-term Planning and Long-term Funding;<\/li><li>During the process of Winding up, a Debenture holder is given preference over a Shareholder;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Benefits_of_the_Issue_of_Debenture\"><\/span>Benefits of the Issue of Debenture<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong><em>benefits of the Issue of Debentures<\/em><\/strong>\nare as follows:<\/p>\n\n\n\n<ol><li>A Debenture does not alter the Shareholding Pattern of a Company;<\/li><li>It does not change the Voting Right Pattern of the Shareholders;<\/li><li>The stamp payable of on a Debenture is just 0.05%, which is comparatively very less than the Stamp Duty payable on Shareholder Loan;<\/li><li>A company pays Interest on a Yearly Basis;<\/li><li>There is no Statutory Limit prescribed for the conversion or redemption of Unsecured Debentures;<\/li><li>During the process of Winding up, a Debenture holder is given preference over a Shareholder;<\/li><li>Issue of Debentures is a cheaper source of finance than Issue of Share;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Different_Types_of_Debentures\"><\/span>Different Types of Debentures<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" loading=\"lazy\" width=\"1024\" height=\"768\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Different-Types-of-Debentures-1024x768.png\" alt=\"Different Types of Debentures\" class=\"wp-image-13325\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Different-Types-of-Debentures-1024x768.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Different-Types-of-Debentures-300x225.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Different-Types-of-Debentures-768x576.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Different-Types-of-Debentures.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure><\/div>\n\n\n\n<p>The <strong><em>different types of Debentures<\/em><\/strong> are as\nfollows:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Based_on_Security\"><\/span>Based on Security<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>On the <strong><em>Basis\nof Security,<\/em><\/strong> a debenture can be divided into two forms as follows:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Secured_Debentures\"><\/span>Secured\nDebentures<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A debenture that carries a charge on the asset is known as the Secured Debentures. Further, the other name for the Secured Debenture is Mortgage Debenture.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Unsecured_Debentures\"><\/span>Unsecured\nDebentures<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A debenture that does not carry a charge on the asset is known as the Unsecured Debentures. Further, the other name for Unsecured Debenture is Naked Debenture.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Based_on_Time\"><\/span>Based on Time<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>On the <strong><em>Basis\nof Time,<\/em><\/strong> a debenture can be divided into two forms as follows:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Redeemable_Debentures\"><\/span>Redeemable\nDebentures<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A debenture that is repayable by the company after the expiry of the prescribed period is known as Redeemable Debenture;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Irredeemable_Debentures\"><\/span>Irredeemable\nDebentures <span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A debenture that is not repayable by the company during its existence is known as Irredeemable Debenture;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Based_on_Convertibility\"><\/span>Based on Convertibility<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>On the Basis of Convertibility, a debenture can be divided into two forms as follows:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Convertibility_Debentures\"><\/span>Convertibility\nDebentures<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A Debenture that is convertible into Equity Share after a period of time is known as Convertible Debenture.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Non-convertibility_Debentures\"><\/span>Non-convertibility\nDebentures <span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A Debenture that is not convertible into Equity Share after a period of time is known as Non-Convertible Debenture.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Based_on_Coupon_Rate\"><\/span>Based on Coupon Rate<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>On the <strong><em>Basis\nof Coupon Rate,<\/em><\/strong> a debenture can be divided into two forms as follows:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Specified_Coupon_Rate_Debentures\"><\/span>Specified Coupon\nRate Debentures<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>When a company issues a debenture with a specific interest rate, the same is known as Coupon Rate Debenture.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Zero_Coupon_Rate_Debentures\"><\/span>Zero Coupon Rate\nDebentures<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>When a company issues a debenture that does not carry a specific interest rate, the same is known as Zero Coupon Rate Debenture.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Based_on_Registration\"><\/span>Based on Registration<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>On the <strong><em>Basis\nof Registration,<\/em><\/strong> a debenture can be divided into two forms as follows:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Registered_Debentures\"><\/span>Registered\nDebentures<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>When a company issues a debenture by recording the name of the holder, the same is known as the Registered Debenture.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Bearer_Debentures\"><\/span>Bearer\nDebentures<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>When a company issues a debenture by mere delivery, the same is known as Bearer Debenture.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Based_on_Priority\"><\/span>Based on Priority<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>On the <strong><em>Basis\nof Priority,<\/em><\/strong> a debenture can be divided into two forms as follows:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"First_Debentures\"><\/span>First Debentures<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A debenture that is given priority at the time of repayment is known as the First Debenture.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Second_Debentures\"><\/span>Second\nDebentures<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A debenture that is repaid after the first debenture is known as Second Debenture.<\/p>\n\n\n\n<p><b>Also, Read:<\/b> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/an-analysis-of-debentures-issued-as-collateral-security\/\">An Analysis of Debentures issued as Collateral Security<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Equity_Shares\"><\/span>Concept of Equity Shares<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term \u201cEquity Shares\u201d denotes the primary source of finance for a limited company. These shares provide various benefits to investors, such as follows:<\/p>\n\n\n\n<ol><li>Right to Vote;<\/li><li>Profit Sharing;\nand <\/li><li>Claim of the\nAssets;<\/li><\/ol>\n\n\n\n<p>Further, an equity shareholder acts as the owner of the company. Moreover, section 43 (a) of the Companies Act 2013 states that an equity shareholder has the rights as follows:<\/p>\n\n\n\n<ol><li>Right to cast a\nVote; and<\/li><li>Right to receive\nDividend;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Benefits_of_the_Issue_of_Equity_Shares\"><\/span>Benefits of the Issue of Equity Shares<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The <strong><em>benefits of Equity Shares<\/em><\/strong> can be\nsummarised as follows:<\/p>\n\n\n\n<ol><li>An Equity Shares\ndoes not create an obligation to pay Dividend at a Fixed Rate;<\/li><li>A Company can\nissue an Equity Share without creating a Charge over an Asset;<\/li><li>An Equity Shares\nacts as the Permanent Source of Capital;<\/li><li>A company needs\nto repay to its Shareholder at the time of Liquidation ;<\/li><li>An Equity\nShareholder act as the Real Owner of the Company;<\/li><li>An Equity\nShareholder has a Right to Cast Vote in Company\u2019s Meetings;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Different_Types_of_Share_Capital\"><\/span>Different Types of Share Capital<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" loading=\"lazy\" width=\"1024\" height=\"768\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Different-Types-of-Share-Capital-1024x768.png\" alt=\"Different Types of Share Capital\" class=\"wp-image-13326\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Different-Types-of-Share-Capital-1024x768.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Different-Types-of-Share-Capital-300x225.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Different-Types-of-Share-Capital-768x576.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Different-Types-of-Share-Capital.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure><\/div>\n\n\n\n<p><strong>The different types of Share Capital are as follows:<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Authorised_Share_Capital\"><\/span>Authorised Share Capital<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The term \u201cAuthorised Share Capital\u201d denotes the maximum amount of capital that a company can issue. Further, a company can increase its Authorised Capital only after taking permission from the respective authorities.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Issued_Share_Capital\"><\/span>Issued Share Capital<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The term \u201cIssued Share Capital\u201d denotes the portion of the Authorised Capital that has been given to the investors for the subscription.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Subscribed_Share_Capital\"><\/span>Subscribed Share Capital<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The term \u201cSubscribed Share Capital\u201d denotes the number of shares that are actually accepted and agreed by the shareholders.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Paid_Up_Capital\"><\/span>Paid Up Capital<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The term \u201cPaid up Capital\u201d denotes a portion of the Subscribed Share Capital and is known as the amount of funds used by the company in the business.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Right_Shares\"><\/span>Right Shares<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When a company issues shares to the existing shareholders in the proportion of their shareholding are known as Right Shares. Further, these are issued by the company to raise its Subscribed Capital.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Bonus_Shares\"><\/span>Bonus Shares<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When a company decides to give a dividend to its shareholders in the form of additional shares, the same is known as Bonus Shares.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Sweat_Equity_Shares\"><\/span>Sweat Equity Shares<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The term \u201cSweat Equity Shares\u201d denotes the shares issued by the company to its employees and directors whenever they perform their job correctly. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_for_the_Conversion_of_Debentures_into_Shares\"><\/span>Procedure for the Conversion of Debentures into Shares<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" loading=\"lazy\" width=\"1024\" height=\"1024\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Procedure-for-the-Conversion-of-Debentures-into-Shares-1024x1024.png\" alt=\"Procedure for the Conversion of Debentures into Shares\" class=\"wp-image-13327\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Procedure-for-the-Conversion-of-Debentures-into-Shares-1024x1024.png 1024w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Procedure-for-the-Conversion-of-Debentures-into-Shares-150x150.png 150w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Procedure-for-the-Conversion-of-Debentures-into-Shares-300x300.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Procedure-for-the-Conversion-of-Debentures-into-Shares-768x768.png 768w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/09\/Procedure-for-the-Conversion-of-Debentures-into-Shares.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure><\/div>\n\n\n\n<p>As per section 71 (1) of the Companies Act 2013, a company has the power to issue debentures with an option of Conversion of Debentures into Shares. <\/p>\n\n\n\n<p>Further, the steps involved in the Process for the <em>Conversion of Debentures into Equity Shares<\/em> are as follows:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Check_Articles_for_Association\"><\/span>Check Articles for Association <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The directors of the company must check the Articles\nof Association before the Conversion of Debentures into Shares. That means the\nprocess of conversion must be allowed in the AOA of the company.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Send_Notice_for_Board_Meeting\"><\/span>Send Notice for Board Meeting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The directors of the company need to send a notice\nof the board meeting at least 7 days before the date of the meeting.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Hold_a_Board_Meeting\"><\/span>Hold a Board Meeting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The directors of the company must pass a BR (Board\nResolution) for allowing the process of Conversion of Debentures into Shares.\nMoreover, in the same meeting, the directors must allow the notice for GM\n(General Meeting). The reason behind holding a General Meeting is to take\napproval from shareholders of the company.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Hold_a_General_Meeting\"><\/span>Hold a General Meeting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Now, the shareholders of the company need to pass an\nSR (Special Resolution) for allowing the process of Conversion of Debentures\ninto Shares. However, it shall be relevant to note that the shareholders of a\ncompany cannot pass an SR unless and until the AOA (Articles of Association) of\nthe company gives the permission of Conversion of Debentures into Shares.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"File_Form_MGT_14\"><\/span>File Form MGT 14<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Now, the directors of the company\nneed to file the SR with the ROC (Registrar of Companies) in the MCA Form MGT\n14. Further, the directors need to file the form within 30 days, starting from\nthe date of passing of SR.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Letter_of_Option\"><\/span>Letter of Option<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The term \u201cLetter of\nOption\u201d denotes a letter sent to the debenture holders for verifying the\nprocess of Conversion of Debentures into Shares. Further, it shall be relevant\nto note that one copy of this document is sent to Debenture Holder and the other\none is sent to the SEBI (Securities Exchange Board of India).<\/p>\n\n\n\n<p>Moreover, the\nsecretary of the company has the authority to send the letter of option to the\ndebenture holders. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Allotment_of_Equity_Shares\"><\/span>Allotment of Equity Shares<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>After the <strong>Conversion of Debentures into Shares<\/strong>, all the debenture holders are asked to return their Debenture Certificates to the company concerned.&nbsp; <\/p>\n\n\n\n<p>Further, the Secretary of the\ncompany has the authority to allot the shares to the Debenture holders.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Issuance_of_Share_Certificate\"><\/span>Issuance of Share Certificate<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In the next step of the process of conversion of debentures into shares, the company will issue the Share Certificates to all the shareholders in the\u00a0<strong><em>MCA<\/em><\/strong> <em><strong>Form SH-1<\/strong><\/em>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Changes_in_the_Register_of_Charges\"><\/span>Changes in the Register of Charges<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Now, the directors of the company will cancel the charges against assets, which were created during the <strong><a href=\"https:\/\/swaritadvisors.com\/issue-of-debentures\" class=\"text-primary\">Issue of Debentures<\/a><\/strong>. <\/p>\n\n\n\n<p>Further, after the Allotment of Shares,\nthe company needs to make necessary changes in the Register of Charges.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Entry_in_the_Register_of_Members\"><\/span>Entry in the Register of Members<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>After issuance of\nShare Certificate to the Shareholders, the directors of the company will enter\ntheir name in the Register of Members.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Filing_of_the_Return_of_Allotment\"><\/span>Filing of the Return of Allotment<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Lastly, the directors of a limited company need to file a Return\nnamed Return of Allotment with the Registrar of Companies (RoC) within a period\nof <strong><em>30\ndays<\/em><\/strong>, starting from the date of Allotment of Shares. <\/p>\n\n\n\n<p>Further, the directors need to file Return of Allotment in\nthe Form PAS 3, together with the (Registration and Offices and Fees) Rules\n2020. Also, the attachments required to be filed with the MCA Form PAS 3 are as\nfollows:<\/p>\n\n\n\n<ol><li>A complete list of the Allottees;<\/li><li>A copy of the BR (Board Resolution) passed;<\/li><li>A copy of the SR (Special Resolution) passed; and<\/li><li>The\nValuation Report;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The provisions of the Companies Act, 2013 authorizes for the process of Conversion of Debentures into Shares. Further, the main reason as to why a company chooses this type of conversion is the economic benefit to the shareholders. <\/p>\n\n\n\n<p>The Procedure for the Conversion of Debentures into Shares is a Tiring, Intricate and Time-consuming task. We at <strong><a href=\"https:\/\/swaritadvisors.com\/\">Swarit Advisors<\/a><\/strong> have an experienced and qualified team of professionals to assist you with the Procedure of Conversion. Our experts will not only plan ideally but will make certain the successful completion of your work.<\/p>\n\n\n\n<p><b>Also, Read:<\/b> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/issue-and-redemption-of-debentures-problems-and-solutions\">Issue and Redemption of Debentures<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The term Conversion of Debentures into Shares denotes a process under which a Debenture Holder decides to become a Shareholder of the company by converting his\/ her Debentures into Shares. Further, after becoming a Shareholder in the company, the said person will get the Right to Vote. In this blog, we will discuss the concept [&hellip;]<\/p>\n","protected":false},"author":17,"featured_media":13323,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[627],"tags":[940],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/13322"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=13322"}],"version-history":[{"count":8,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/13322\/revisions"}],"predecessor-version":[{"id":16640,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/13322\/revisions\/16640"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/13323"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=13322"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=13322"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=13322"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}